Bad Credit
Auto Loans

Are you one of the many Americans with a poor credit history? Do you desperately need auto financing but have a credit score (also known as your FICO score) below 600? If you answered yes to both of these questions then you will be relieved to know that there are a number of lenders who work with car dealers to offer bad credit car loans.

There are mainly two types of lenders who will offer people with problem credit the ability to finance a vehicle and they include:

Special finance auto lenders

Driverslane.com explains the only negative about working with one of these lenders, who make loans through retail car dealers, is that they usually charge a higher interest rate than lenders who finance people with good credit. That is because this is a form of subprime auto lending and, due to the fact that the risks are much higher for these types of loans, the rates are higher than those of more conventional lenders such as banks and credit unions (whose rates are usually closer to "prime" rates).

Buy here pay here or "tote the note" lenders

These are lenders who are also car dealers. Unlike most traditional new car dealers, the dealers who do in house financing don't follow what might be considered the "normal" rules of auto financing. If you visit one of these dealers while shopping for a car and a bad credit auto loan, you'll find that buy here pay here dealers usually aren't as stringent as those lenders that offer bad credit car loans.

These bad credit car dealers will verify your income and residence while you are applying for auto finance. Recent repossessions or foreclosure are usually not an issue. What these dealers will ask for is that you make weekly payments on the lot, given the average value of the cars they sell. It also means that the annual percentage rate of interest charged by these dealers is higher than what most bad credit car loans lenders would charge.